InnerWorkings Announces Fourth Quarter and Full-Year 2017 Results

CHICAGO--(BUSINESS WIRE)--
InnerWorkings,
Inc. (NASDAQ: INWK), the leading global marketing execution firm,
today announced financial results for the three months and year ended
December 31, 2017. For all non-GAAP references below, please refer to
the non-GAAP reconciliation tables at the end of this release for more
information.

"We had a strong finish to 2017 with a growth rate that exceeded our
expectations. In addition, we've won several large new contracts in
recent months, and we're well down the path on a number of exciting
sales pursuits," said Chief Executive Officer Eric D. Belcher. "This
combination sets us up for strong growth in 2018."

Fourth Quarter 2017 Results

Record gross revenue was $301.0 million in the fourth quarter, an
increase of 11% compared with $270.4 million in the fourth quarter of
2016.

Gross profit (net revenue) was $71.3 million, or 23.7% of gross
revenue, in the fourth quarter, an increase of 4% compared to $68.7
million, or 25.4% of revenue, in the same period of 2016.

Net income for the fourth quarter was $1.5 million, or $0.03 per
diluted share, compared to $5.0 million, or $0.09 per diluted share,
in the prior year period.

Non-GAAP adjusted EBITDA was $14.6 million in the fourth quarter,
compared to $15.7 million in the fourth quarter of 2016.

Non-GAAP diluted earnings per share for the fourth quarter was $0.06,
compared to $0.12 in the fourth quarter of 2016.

Full-Year 2017 Results and Recent Highlights

Gross revenue was $1,136.3 million in 2017, an increase of 4% compared
with $1,090.7 million in 2016.

Gross profit (net revenue) was $278.3 million, or 24.5% of gross
revenue, in 2017, a 6% increase compared to $263.5 million, or 24.2%
of revenue, in 2016.

Net income in 2017 was $19.0 million, or $0.35 per diluted share,
compared to $4.4 million, or $0.08 per diluted share, in 2016.

Non-GAAP adjusted EBITDA was $62.3 million in 2017, reflecting growth
of 5% compared to $59.2 million in 2016.

Non-GAAP diluted earnings per share for 2017 was $0.41, compared to
$0.38 in 2016.

Cash flow from operations was $16.1 million in 2017, compared to $10.5
million in the year before.

InnerWorkings signed new client contracts during 2017 totaling $130
million of annual revenue at full run-rate. This growth is a blend of
expansions with existing accounts as well as the addition of a number
of first time clients.

In 2018 to date, InnerWorkings has already signed several new client
contracts totaling $41 million of annual revenue at full run-rate.

"Our expected growth in 2018 will generate meaningful operating leverage
and free cash flow in 2018, giving us the ability to reinvest in our
business on behalf of our clients, employees and shareholders," said
Chip Hodgkins, Interim Chief Financial Officer of InnerWorkings.

Rich Stoddart, incoming Chief Executive Officer, added, "InnerWorkings
has evolved its business over the past five years to be at the forefront
of software, digital, and other growing components of marketing
execution. I look forward to helping the company capitalize on its early
lead in this emerging market."

Outlook

InnerWorkings reaffirms the existing full-year 2018 guidance announced
previously. The Company expects 2018 annual gross revenue to range
between $1,195 million and $1,230 million, representing growth of 5% to
8% compared to 2017. Non-GAAP adjusted EBITDA is expected to be between
$74 million and $77 million in 2018, representing growth of 19% to 24%
compared to 2017. The Company forecasts 2018 non-GAAP diluted earnings
per share to be $0.56 to $0.59, representing growth of 37% to 44%
compared to 2017.

The phone number to access the conference call is (877) 771-7024. A live
audio webcast of the call will be available through InnerWorkings'
website at http://investor.inwk.com/events.cfm.
A replay of the webcast will be available later today at the same
location.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as
"non-GAAP financial measures" by the SEC: non-GAAP adjusted EBITDA and
non-GAAP diluted earnings per share. The Company believes these measures
provide useful information to investors because they provide further
insights into the Company's financial performance. These measures are
also used by management in its financial and operational decision-making
and evaluation of overall performance. The presentation of this
financial information, which is not prepared under any comprehensive set
of accounting rules or principles, is not intended to be considered in
isolation or as a substitute for the financial information prepared and
presented in accordance with generally accepted accounting principles.
For a reconciliation of these non-GAAP financial measures to the nearest
comparable GAAP measures, please see the reconciliation of non-GAAP
adjusted EBITDA and non-GAAP diluted earnings per share included in this
release.

The Company has not quantitatively reconciled its guidance for non-GAAP
adjusted EBITDA or non-GAAP diluted earnings per share to their most
comparable GAAP measure because the Company does not provide specific
guidance for the various reconciling items as certain items that impact
these measures have not occurred, are out of the Company's control, or
cannot be reasonably predicted. Accordingly, a reconciliation to the
nearest GAAP financial metric is not available without unreasonable
effort. Please note that the unavailable reconciling items could
significantly impact the Company's results.

Forward-Looking Statements

This release contains statements relating to future results. These
statements are forward-looking statements under the federal securities
laws. We can give no assurance that any future results discussed in
these statements will be achieved. Any forward-looking statements
represent our views only as of today and should not be relied upon as
representing our views as of any subsequent date. These statements are
subject to a variety of risks and uncertainties that could cause our
actual results to differ materially from the statements contained in
this release. For a discussion of important factors that could affect
our actual results, please refer to our SEC filings, including the "Risk
Factors" section of our most recently filed Form 10-K.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) is the leading global marketing
execution firm serving Fortune 1000 brands across a wide range of
industries. As a comprehensive outsourced enterprise solution, the
Company leverages proprietary technology, an extensive supplier network
and deep domain expertise to streamline the production of branded
materials and retail experiences across geographies and formats.
InnerWorkings is headquartered in Chicago, IL and employs 2,000
individuals to support global clients in the execution of multi-faceted
brand campaigns in every major market around the world. InnerWorkings
serves many industries, including: retail, financial services,
hospitality, consumer packaged goods, nonprofit, healthcare, food &
beverage, broadcasting & cable, automotive, and transportation. For more
information visit: www.inwk.com.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

(unaudited)

(unaudited)

Revenue

$

300,950

$

270,418

$

1,136,256

$

1,090,704

Cost of goods sold

229,639

201,691

857,921

827,156

Gross profit

71,311

68,727

278,335

263,548

Operating expenses:

Selling, general and administrative expenses

60,091

54,456

225,738

209,967

Depreciation and amortization

3,987

3,534

13,390

17,916

Change in fair value of contingent consideration

—

442

677

10,417

Intangible asset impairment charges

—

70

—

70

Restructuring and other charges

—

1,181

—

5,615

Income from operations

7,233

9,044

38,530

19,563

Other income (expense):

Interest income

20

23

97

86

Interest expense

(1,491

)

(918

)

(4,729

)

(4,171

)

Other, net

(826

)

(168

)

(1,788

)

(153

)

Total other expense

(2,297

)

(1,064

)

(6,420

)

(4,238

)

Income before income taxes

4,936

7,980

32,110

15,325

Income tax expense

3,437

2,933

13,131

10,955

Net income

$

1,499

$

5,047

$

18,979

$

4,370

Basic earnings per share

$

0.03

$

0.09

$

0.35

$

0.08

Diluted earnings per share

$

0.03

$

0.09

$

0.35

$

0.08

Weighted-average shares outstanding - basic

54,113

54,025

53,851

53,607

Weighted-average shares outstanding - diluted

55,175

55,019

54,944

54,460

Condensed Consolidated Balance Sheets

(in thousands)

December 31, 2017

December 31, 2016

Assets

Current assets:

Cash and cash equivalents

$

30,562

$

30,924

Accounts receivable, net

206,712

182,874

Unbilled revenue

49,389

32,723

Inventories

34,807

31,638

Prepaid expenses

19,638

18,772

Other current assets

32,694

24,769

Total current assets

373,802

321,700

Property and equipment, net

36,714

32,656

Intangibles and other assets:

Goodwill

207,162

202,700

Intangible assets, net

27,563

31,538

Deferred income taxes

612

1,031

Other non-current assets

1,382

1,374

Total intangibles and other assets

236,719

236,643

Total assets

$

647,235

$

590,999

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

134,609

121,289

Current portion of contingent consideration

—

19,283

Accrued expenses

33,694

30,067

Other current liabilities

39,538

35,049

Total current liabilities

207,841

205,688

Revolving credit facility

128,398

107,468

Deferred income taxes

12,348

11,291

Other non-current liabilities

1,874

1,926

Total liabilities

350,461

326,373

Stockholders' equity:

Common stock

6

6

Additional paid-in capital

235,199

224,480

Treasury stock at cost

(55,873

)

(49,458

)

Accumulated other comprehensive loss

(11,863

)

(20,799

)

Retained earnings

129,305

110,397

Total stockholders' equity

296,774

264,626

Total liabilities and stockholders' equity

$

647,235

$

590,999

Condensed Consolidated Statement of Cash Flows

(in thousands)

Year Ended December 31,

2017

2016

Cash flows from operating activities

Net income

$

18,979

$

4,370

Adjustments to reconcile net income to net cash provided by
operating activities: